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would you like to know your net worth and all the numbers that lead up to the net worth calculation well now that we've finished learning about an individual profit and loss we will now learn about individual personal balance sheet [Music] if you have any questions about this topic you can leave them in the comments section below and i'll do my best to help you and of course if you feel the video helped you i hope you will click like and don't forget to subscribe to get updates on new videos that come out all the time a person trust or estate can have a balance sheet a balance sheet shows the financial position of the entity as of a specific moment in time it shows the net worth or the real worth of the person trust or estate so is that the same thing as total assets well it could be but the truth is your net worth is reduced by the liabilities you have that means the money that you owe at the moment that you're measuring your net worth so if you know your total assets and you subtract out your liabilities then you will know your total net worth seems like a pretty easy calculation but then the question is do you really know the value of your liabilities and the answer is yes every time you take a loan or owe money to a financial institution in one way or another there will always be a monthly statement or some kind of document or set of documents that tells you all the information about the money you owe it will tell you how much the original debt was how much each payment was and what the debt is at the moment that you're making the balance sheet so if you know your assets then you can calculate your net worth by subtracting your liabilities but then the question is how do you really measure the value of your assets once you know your assets you could just subtract the liabilities that you know and you know your net worth and finding the value of your assets is a whole nother topic that will be shown in the videos that follow this one this video we're focusing on net worth and then the question is where on the balance sheet would the net worth be well the answer is the net worth will show in the owner's equity section of the balance sheet of the person or entity that you're making the balance sheet for you see if this were a business the equity would represent the equity on the balance sheet that is would represent the amount of ownership claim or ownership rights that the owner has in the business but if you're talking about a personal individual balance sheet the equity of a business is analogous to or similar to the idea of the personal net worth so that's why if you're using quickbooks to find your net worth it would be in the owner's equity section of the balance sheet however to make it clear that this is the balance sheet of a person or a trust or an estate you should change the name of the equity accounts to net worth so that it's clear that this balance sheet is for a person so then the question is what equity accounts are already in your chart of accounts now and the answer is that depends did you make your quickbooks file for home finance setup if you did and you were following the original videos in this video series that means in order to make the file for personal home finance when you were asked to select an industry you were instructed to choose other none and part of the file creation process you were asked to select a company type and you were instructed to put other none and if you did that in both cases when you created the file that means that you have the minimum amount of owner's equity accounts but if you did not do that while you were creating the file you would have to open the company main menu then open the my company window then click the pencil tool to get the company information window then click report information and change it to other none so that you can have the minimum number of equity accounts and let me show you what i mean if you did not answer the questions correctly when you created the file you would click company my company and of course you'd be able to click the pencil tool to change your address and so forth and all the information that prints on the forms and reports but if you click the pencil tool and you click report information you can change which tax form this particular quickbooks file will import into so if you chose other none you should only have these two equity accounts the minimum number of equity accounts that you can have when setting up if not you will have to edit your chart of accounts to have just these two after you changed it in the my company window that i showed a moment ago but these two names of the two equity accounts are not really appropriate for individuals now remember dealing with equity accounts can be complex and you would have to know some accounting ideas in this course we're going to set up the equity accounts in the most basic way that satisfies the conditions that we need if it needs changing the accountant will change it because if it's an estate or a trust someone with experience with estates and trusts will know how to change the names of the equity accounts as well as add or remove any equity account so let's change the names and make them more relevant for an individual balance sheet let's change the name of opening balance equity and retained earnings to make them more understandable if it's the balance sheet of a person let's change the name of opening balance equity to original net worth and let's change the name of retained earnings to net worth from income and that's all we have to do and the balance sheet will be more understandable list chart of accounts click on opening balance equity account edit original net worth and that's the net worth before you started using quickbooks now retained earnings account edit net worth from income and that's the net worth that you added after you started using quickbooks now if you open up a balance sheet we click reports company and financial balance sheet standard now if you scroll down to the equity section you can see open it up you can see that we only see net worth from income in our example that's because the original net worth was not put in we did not put in the value of the assets on the day that we started doing quickbooks for our home finance but if we did the assets would be listed up here and the balancing entry would be the original net worth down here and in the videos that follow we will learn how to put in the original assets that we had when we started using quickbooks you see original net worth is equal to the value of the assets minus the liabilities at the moment we started using quickbooks and we would normally put them in the only problem is i chose to save assets to the end of the course so what you see in the following videos might be done at the beginning to give you your original net worth and your net worth from income simply means that after you started using quickbooks all of the prior year's net income will show in that one number accumulated net income and that's how you manage net worth for a person or an estate or a trust you